Business Agility: Sustainable Prosperity in a Relentlessly Competitive World

Chapter 1. Responsiveness Trumps Efficiency

Today's global economy squeezes profit margins more efficiently than ever before. Electronically connected global markets are doing what markets do so well; the commodities traders and stockbrokers call it "efficient price discovery." That phrase means global markets are constantly finding the lowest price for all basic commodities and services based on current supply and demand—everything from blue jeans to fuel oil, and hotel rooms to accounting services—and constantly resetting those prices as conditions change.

This market driven efficient price discovery tends to relentlessly reduce profits and drives the prices people can charge for products and services closer and closer to their cost of production (sometimes even below their cost of production). Companies are always moving their production to low-cost labor markets and outsourcing activities in a scramble to lower the cost of production so that they can still make a profit at price points set by the market.

For this reason, the best profits for most companies no longer come from standard or commodity products; the best profits are now to be found in new and creative products and services. If these new products catch on, for a while they have no competition and there is lots of demand so prices stay high. But products and services are new and innovative for only a short time. Then they become commodities because they get copied and offered at lower prices. And when that happens, profit ...